Indian Property News on 'March, 2007'

Ajmera to Give A Push to SPSL

Ajmera Group, a $450 million conglomerate based in Mumbai, has finalized its decision to merge its leading real estate arms with Shree Precoated Steels Ltd (SPSL), its group firm that runs the business of making color coated galvanized steel sheets.

The group has plans to consolidate its existing eight real estate projects into Shree Precoated. The shift to fold such crucial projects into its galvanized steel firm is estimated to increase the enterprise value of SPSL to over Rs 5,334 crore against Rs 3,457 crore pre-merger.

The merger of SPSL in Ajmera group will help the former to emerge as one of the pioneering property developers within India with exposure to steel business. The Shree Precoated shares have witnessed a drop in line with the general market trend.

Experts see merging the real estate business with a listed group entity reduces the lead time for the business to unlock value.  The most important part is that the steel maker has bagged the handsome investment from the foreign players like George Soros’ Quantum Fund, who made the investment of around Rs. 80 crore to pick up a 4.17% stake.

Of all the eight real estate projects with Ajmeras, the project at Kanjurmarg is the largest one that has been consolidated with Shree Precoated.

The project is on its track under the Special Purpose Vehicle (SPV) names Jolly Brothers Pvt. Ltd. The group is also drawing plans to develop a commercial space which will feature IT Towers, hotels, and an education centre. The land valuation is evaluated to be around Rs 41 crore.

There is another residential project under an SPV called Anik Development Corporation which has been merged with SPSL.

L.J. Hooker Carves Out Expansion Plans For India

LJ Hooker, the Australian real-estate company, which opened its outlet in Koramangala, Bangalore inaugurated its first franchise store with much fanfare is all set to make a spectacular entry into the Indian real estate market.

Established in 1928 by Sir Leslie Joseph Hooker, it has achieved unqualified success in creating its international network that spreads across a host of countries in South-East Asia that includes Papua New Guinea, Indonesia, Hong Kong, New Zealand, and China. The Group has more than 730 franchises in Australia and Asia.

LJ Hooker is bringing to the Indian real estate operations its international network franchising model called the ‘L.J. Hooker franchise model’ backed by a strong software support and internet-based operation.

This model has won the company the prestigious `Australian and New Zealand Franchiser of the Year Award.’

The company aims to offer a comprehensive, reliable and efficient value-added service to the customer who wants to buy, sell and rent or needs to be advised on property matters. Its bouquet of services includes a rent-management program and a portfolio management scheme apart from consultancy services.

“Apart from finding a tenant for vacant commercial/residential space, we undertake property management activities like collecting rent on behalf of a landlord, paying his taxes for him, renewing leases, carrying out maintenance work on the property among others,” said Mr. Ramneek Bakshi, Principal Franchise, L J Hooker, India.

“At L.J. Hooker we want to capture a customer through all phases associated with buying, selling, renting and leasing a property including financing, conveyancing, insurance, relocating and utility connections,” said Warren McCarthy who heads the worldwide L J Hooker Group. “It’s a one-stop shop with pre-and-post-deal services ensuring customers that `nobody does it better,” he explained.

The move indicates Mr. Warren McCarthy’s strategic foresight in placing India in his global plan of expansion. On his choice of the city, he agrees that he zeroed in on Bangalore as it has highly networked and technology oriented individuals looking for a “reliable and transparent experience” that the model favours.

He also insists that the concept of real estate franchising requires a paradigm shift, as it were in mindset to grasp its broad nature and value additions.

There is a great deal of focus on training and education for franchisees as they become a part of a community that allows them to interact, learn and share their experiences. Franchise owners can get a better perspective of business, marketing and professional real estate management.

The company has a vision for itself, which is to create stores of L J Hooker in virtually every neighbourhood of a city so that persons living abroad wanting to buy or sell properties back home can operate from the nearby L J Hooker stores and network with the stores in their home town to do the job.

The move augurs well for the Indian real estate market.

Blackstone Carving a Niche in Indian Real Estate

Blackstone, a leader in the field of private equity investing since 1987, is planning to raise $4 billion from an Initial Public Offer (IPO) in the US. This is believed to further boost investments in India after closing the public issue.

At present, the current investment of the group has already reached sky high with $2.5 billion, while it has also announced to create a $5 billion fund with Citigroup Inc. to make investments in a number of Indian infrastructure projects.

The group regards India as an emerging force in real estate industry and sees a large market for its future plans. It envisages beefing up its investment portfolio and its executive team in the country.

The company has set up one of its establishment in India in 2005 and hired Amit Dixit, previously a prinicipal at Warburg Pincus in New York, to be a part its India team in the financial capital of the country, Mumbai.

Blackstone is showing large inclination for various sectors including IT, media, technology, and banking for its future India investment plans.

Two New York Stock Exchange (NYSE) listed funds of the PE giant – Asia Tigers Fund and the India Fund have put a whopping $2 billion dollars ion the shares of Indian conglomerates.

The India Fund is known to have made an investment of over 98 per cent money in Indian stocks, totaling $1.88 billion. Wishing to carve out a substantial niche in Indian real estate, Blackstone has established a real estate operations office in Mumbai in 2007 to search the prospects in this fast flourishing sector.

Service Tax will be Charged on Rentals of Commercial Property, says FINMIN

Despite of strong protests from different sectors of India Inc, the finance ministry does not seem to change its stand of levying a service tax on renting of immovable property for commercial purposes.

Such property rentals are essential services and so should be brought under the service net tax. However, a final decision is still awaited for the amendments to the Finance Bill, which is likely to be tabled in the Parliament after the recess.

A service tax of about 12.36% will be levied on the rental of commercial property. The finmin is also thinking about increasing the scope of service tax to property leased for residential purpose. As such, there is no such proposal in the ministry’s pipeline.

Finance minister, P. Chidambaram has introduced service tax on rental of immovable property used for commercial purpose in Budget 2007-08. The proposal is not extended to the residential property, vacant land used for agriculture and similar purposes, and immovable property for educational or religious purposes.

The major sufferers will be corporates, multinationals, retail sector, restaurants, BPOs, IT companies, and multiplexes. Most of these companies especially BPOs take the property on rent to carry out their operations.

In addition, it’s natural for the property agents to feel anxious because of the proposed tax. For that reason, their protest is justified as they are of view that it would only lead to a further increase in rental prices.

There seems to be a common reason for protest from all quarters of life i.e. real estate boom, along with the lack of commercial space which has already pushed the rental rates to sky high. Service tax will be an additional burden.

Govt Asks RIL to Cut Size of Its Maha Mumbai SEZ

Reliance Industries may require to cut down the size of the proposed multi product Maha Mumbai Special Economic Zone (SEZ) from 10,000 hectares to 5,000 hectares. It has been decided to prevent dislodging farmers who are unwilling to relocate. The decision is likely to be taken at the next meet of the empowered group of ministers (eGoM) on SEZs.

The company has faced a strong protest from the farmer groups, political parties and small businesses intensifying in the state, the government’s proposal could be seen as an effort to avoid the same violence that took place in West Bengal’s Nandigram.

If Reliance cuts on its operations by half in Maha Mumbai, the sensitive areas could be excluded from the zone and peace can be restored, say the officials. Also, the land planned for the development of Maha Mumbai SEZ was more than the required. The situation is becoming worst. For that reason, Pranab Mukherjee, the foreign minister is likely to ask Reliance to reduce the size of the SEZ. Further, the date of EGoM will decide about the future course of the SEZ policy.

The Board of Approvals says to have asked the Maharashtra government to ponder over the size of RIL’s SEZ after it received a number of representations. Despite all, Maharashtra Government has given a nod for the acquisition of over 10,000 hectares and that land being a state subject.

A number of villagers have protested the SEZ project to be built by RIL.  Of the 45 villages from the three Talukas of Pen, Urban and Panvel to be acquired, the company was not even able to final the deal with 20 villages from Uran Taluka.

IBM Gets Rs 128 Cr Contract to Build IT Infrastructure for DLF

IBM India has got a $29 million contract from DLF to manage its IT infrastructure. The IT service giant has signed a 10 year contract according to which it would create and maintain policies, standards, technology and delivery infrastructure, and standardize them as part of a broader transformation initiative, which runs across over 20 locations in India.

IBM would undertake security and disaster recovery planning while deploying an organization security framework and check security readiness for ISO 27000. The company would be sole responsible for providing helpdesk to DLF users across India. It would support the present IT requirements of DLF businesses and will enable them the real estate companies to offer new business prospects with speed- providing for a predictable cost of IT for DLF as it grows.

IBM has recently signed a $600-800 million outsourcing contract with the Idea cellular, based on innovative risk reward revenue-sharing model. The contract includes the current operations and potential new additions of Idea, which boasts to have 14 million subscribers.

The partnership between IBM and DLF will let the two giant conglomerates to set up a Technology Innovation Council (TIC) to identify and come up with breakthrough solutions for DLF and Indian real estate industry. The solutions will include advanced security management solutions such as digital video surveillance, technology for land acquisition process and other management systems.

RBI Forwards a Question Bank to Banks

The Reserve Bank of India (RBI) seems to take a strict attitude towards banks related to the real estate and home loan portfolio. It has given the banks a list of 32 questions including information on whether they expect any correction in real estate prices.

The banks will also require showing the procedure of how they evaluate property, the market sources they trust to calculate the actual property, and the documents that are obtained from customers while issuing loans. The authority has also asked the banks to supply adequate information on the relationship of loan to property value.

It is like a questionnaire for the Banks who also tell the RBI whether they expect property prices and the home loan demand to come down in near future and the kind of risk factors associated in lending to the Indian real estate market. Banks need to present their stand on whether they are conducting any stress test on its real estate and home loan portfolio; whether they have any reset period on fixed rate loan and the kind of benchmark strategy they use to reset interest rate incorporated in the loan scheme.

RBI is believed to have set up an internal committee to understand the trend on the real estate and home loan segment. The garnered data will help the committee to follow the historic development in this segment. RBI seems to be highly concerned about this portfolio as real estate prices in India continue to go through the roof as there is no tomorrow.

Sarita Vihar and Jasola Reaching New Highs

There are several locations in Lutyen’s Delhi which have emerged as the favorite destinations of property developers and people interested in making investments in properties. Two of such places that have certainly witnessed a paradigm shift in development of middle and upper middle class residential colonies.

These colonies enjoy the strategic location of being situated on the main Mathura Road (NH-2) and have great connectivity to central and south Delhi on one side (Ashram Chowk is 5-6 km away), and Faridabad on the other. The residents here can have the convenience to travel to a number of industrial and business destinations. Okhla Industrial Area, Phase I and II, are just located opposite to these colonies on the other side of NH-2. Mohan Cooperative Industrial Estate is also in the proximity.

Another major business centre in Delhi, Nehru Place is barely 6-7 km away from these residential colonies. As for the working executives in Faridabad, Sarita Vihar and Jasola are considered to be the ideal places. Badarpur border is 2 km away. With the construction of Badarpur border, the travel time to Faridabad will be reduced.

Residential Real Estate Boom in Sarita Vihar and Jasola

DDA flats dominate in the residential colonies of Sarita Vihar. Jasola too has DDA flats, whose prices are although lower than the DDA Flats in Sarita Vihar. Also, there are plots and Kothis in Jasola. Few years back, the rate of land in Jasola was near about Rs 46,000 per sq m which has shot to Rs 1-1.25 lakh per sq m in pockets 1 and 2. Jasola is also going to witness the builder floors soon.

Some real estate agents see the prices going on an average rate in Sarita Vihar and Jasola, which is due to the strategic location of these places. There is a spurt in commercial projects in Jasola which have also had a positive impact on residential prices.

Readers can get a fair idea about property rates in Sarita Vihar from the chart given below:

Sarita Vihar and Jasola are two of the places sought out for rental housing. The rental rates here vary according to the size, floor, and location of the apartment. An LIG Flat is easily available on the rent for Rs. 3,500 – 5,500, whereas the rent for an HIG Flat is no less than Rs. 12,000 per month.

Facilities Available in Jasola and Sarita Vihar

Jasola features a large sports complex. Catering to the demanding educational requirements of its residents and their next generation, Jasola has some of the prominent institutions.

Talking about Sarita Vihar, it has a number of schools which includes the names of Dreamland and Kindergarten in Pocket L, DAV School in Pocket E, Santgiri in Pocket A, Glory Public School in pocket B, and Central School in Pocket C.

Indraprastha Apollo, Escorts, and Holi Family are some of the famous hospitals located within the radius of 5 km of Sarita Vihar.

Emerging Commercial Hubs

Jasola is going to emerge as the next commercial hub of New Delhi in the wake of the scheduled real estate projects. Nearly 20 lakh sq ft of commercial space is being developed here. Property developers such as DLF, Omaxe, Realtech, Salcon, TDI, Uppals, and Aditya Buildwell are planning to establish substantial presence in Sarita Vihar and Jasola.

Submitted By: Rakesh

Property Expo in Coimbatore Is Another Huge Success

The third property expo held in the city of Coimbatore provided the property developers with excellent prospects. It also offered a chance to common man to be abreast with energy efficient and environment friendly buildings.

This recently concluded fair was jointly organized by Association on Consulting Civil Engineers India (ACCE), builder’s Association of India (BAI), and Coimbatore District Small Industries Association (CODISSIA). The fair is believed to have generated around Rs. 100, 00,000 business.

T.R Baalu, Union Minister for Shipping Road Transport and Highways, inaugurated the fair. Many famous personalities who graced the fair with their presence include the prominent names of Pongalur N. Palani, Minister for Rural Development, Government of Tamil Nadu and Professor M. Naganathan, Deputy Chairman, State Planning Commission. The fair was attended by around 1, 25, 000 visitors who passed through the portals of this Fair that concluded on 29th January with a valedictory function presided over by Coimbatore Mayor, R. Venkatachalam.

Kolkata Heritage Buildings

INTACH has a record of publishing books on the buildings and enjoys great status both in New Delhi and in Chennai. The same trend has now been followed by The Indian National Trust for Art and Cultural Heritage (INTACH). It has come up with a fine book of listings titled ‘Calcutta Built Heritage Today’. The book is sponsored by Ambuja Realty.

The book features around 500 buildings, Documentations, compiling and photographing of the buildings was done by Nilina Deb Lal. The book contains different categories of buildings, and sub heads containing information on individual buildings, date on which it was built, ownership, and occupancy details, maintenance along with other significant features.

HUDA Auction Nets Rs 740 Cr in Three Months

The rising real estate prices in the state of Haryana has brought a merry time for the Haryana Urban Development Authority (HUDA). The authority has garnered a sum of Rs 740 crore through the auction of various commercial sites.

A hotel site in Sector-14 has fetched a whopping Rs. 61 crore against the reserve price of Rs. 36 crore. The site had been auctioned to M.D.L.R Hotels. Of all the sites put for auction, the lowest auction went for 45.50 lakh for a single storey booth comprising the area of 222.68 square metre in Sector 21.

The authority auctioned 25 sites in December last year, 9 in February 2007 and 10 sites have been auctioned in 2007. Interestingly, all the sites have bagged more than their reserve price. HUDA further has 50 other sites in its bag which it envisages to release in the next six months. Sites for the development of shopping malls, departmental stores, commercial spaces, and multiplexes are also in the line to be auctioned this month.

Also, there are another 125 budget hotel sites in some major locations of Haryana including Kundli, Faridabad, and Gurgaon. These sites are to be auctioned in the near future by the authority.

Among all the sites out for auction, a five star hotel site in sector 47, Gurgaon fetched the maximum amount of Rs 225.20 crore in February 2007 against its reserve price Rs. 163.90 crore. Following are the other sites which have gone for high prices. It includes a multiplex site in sector 23-23/A which cost the buyer Rs 72.5 crore against its reserve price of Rs 21.46 crore in December.

A 2700 square metre multiplex site in sector 55/56 was auctioned for Rs 73.4 crore against the reserve price of Rs 60.1 crore.